Who Pays for Rebuilding the Internet?

pcause writes "The Internet (physical as opposed to technical) was really not designed for applications that want to use maximum bandwidth all of the time, such as P2P and streaming video. Here in the US we've seen Comcast try to balance the demands of P2P traffic with other traffic and its backbone capacity. In the UK, a flame war has broken out between the BBC and ISPs about the same issue. So the question is who pays? Should the content owners who make the profits pay for the extra infrastructure, or should the consumer pay?"

Comments

Consumers pay ISPs

[gringer]

Okay, I live in a somewhat crazy country (New Zealand) in which we have this deal where both parties pay an ISP for Internet services. The consumer of the product (e.g. people who view videos) pays their ISP for internet traffic (something like $b + $x per hour + $y per gigabyte, billed or prepaid at some interval, where b, x, y may be zero). The providers of the product (e.g. people who host videos on their server) are themselves consumers of Internet services, so also pay their ISP for internet traffic. It seems to generally be the case that each party pays for both upstream and downstream traffic.

The idea of this approach seems to be that the money given to the ISP goes towards paying other higher-level providers for traffic, and upgrading the network where/when necessary. If the ISP doesn't think they have enough money to support traffic, they should either bump up consumer prices, or alter their accounting system. Both consumers and providers of products are already paying the ISP for the traffic and infrastructure maintenance.

Re:And as a further optimization...

[bagboy]

The ISP world has changed significantly from "many years ago". P2P, streaming media and Itunes-like services mean folks leave their systems on and pull content 24/7. As stated, 2-4 is the only low point (and we are not a small, more a medium-sized ISP). Margins for small-medium sized ISPs are pretty thin. You're not going to have "loads" of spare bandwidth if you expect to maintain any profit at all. I live in a state where the majority of locations are served via satellite. It's not cheap to rent time on a sat btw.

Re:Duh - we all do.

[abigor]

Uh...the US government did build the internet.

Re:Duh - we all do.

[Dun Malg]

So, if by "build" you mean "solicited bids," then yes. Yes it is, then, as that is how the government "builds" everything it builds. The Lunar Lander was built by Grumman, who won the bid. The M-1 Abrams, General Dynamics, who won the bid. The Interstate Highway System, which was built by hundreds of different contractors who won the damned bid to build them. With the exception of historical oddities like the Springfield Armory (closed in 1968) and the Army Corps of Engineers, that's the way the feds get things done: they pay someone else to build it to their specs.

Re:Duh - we all do-complain.

[uncqual]

bandwidth has no significant incremnetal cost once certain fixed capital has been invested

Capital costs (including installation and equipment), along with debit service on that sum, must be recovered over the useful life of the asset for a business to be viable. Given the pace of technology and the demand for new capabilities, the asset life can be fairly short. This debt service manifests itself as a continuing incremental cost over the life of the asset.

For the obligatory car analogy... If you bought a car using a 48 month loan (I've never financed a car, but I assume that may be a typical duration nowadays), by the time the loan is paid off, the value of the car is substantially reduced (perhaps down to your down payment depending on how many miles it was driven) and you paid both the principle and the interest over the primary useful life of the car.

Of course, ongoing maintenance (labor of repair and administration as well as cost of replacement parts) and operational costs such as power, cooling, insurance, also must be recovered. For example, it really does cost more to run 2N routers than to run N routers.

Re:Duh - we all do-complain.

[BitZtream]

The problem is, companies like Time Warner/Road Runner, Charter, Comcast, and the DSL providers make so much profit off their networks that massive upgrades get paid off in an extremely short period of time.

Knowing the costs involved the local Road Runner division, coupled with the number of accounts they hold, the proper analogy would be something like this:

Tell the customer it will take 48 months to recoupe the cost of this upgrade, regardless of the fact that it'll be paid off by half our subscribers next month, leaving the other half for pure profit.

2N routers does cost more than N routers, this is true. The problem is that they could manage 100N routers and fill them up with bandwidth and STILL make a fair profit.

You're completely ignorant if you think the cable/dsl providers aren't making a fortune. Even putting new fibre in the ground gets paid off when the first year in most cases, and once its there its just a matter of lighting it with the right bandwidth, think about the half million dollar router that gets implemented. If its only spread across 50k customers, thats $10/customer to pay it off. Thats less than 25% of a monthly bill in most areas. The UBR routers don't serve that many people of course, but they also don't cost half a million.

We ARE (the cable/dsl customers) already paying for the upgrades! We've been paying far more for service than we should have been for years. We've paid for the upgrades. The BBC pays for the bandwidth that is required to keep from filling up their own pipes. Our ISPs are not paying for the bandwidth required to serve their network, hence their pipes are full.

This is the way the Internet works. I pay for my pipe to the cloud. BBC, Yahoo, Google/YouTube, Microsoft, Apple, all of them, pay for their pipe to the cloud. I get my fair share of their pipe. If they want me to have more speed, they pay to make their pipe bigger, and assuming mine isn't overloaded, I get more. The Internet has always been a 'pay for your own pipe' type of network, the service providers would rather it be 'the other guy pays for the privledge of using the pipes I'm already charging my customers for' which is ridiculous to say the least. If the various countries of the world don't step up and enact network neutrality laws, I fear the Internet we know and love will not exist in the long term.

The problem is the cable and DSL providers have over sold their crappy bandwidth and don't want to pay for more. It has nothing to do with not having the money to pay for more, they are making an absolute fortune every month. If someone else wants to start another broadband provider in the area other than the massive initial investment that someone has to lay out, which wouldn't be a problem if the new provider could charge the same price as the monopilistic provider already in the area, the local monopoly can just drop their price. Go from $40 to $10, still turn a profit, although much smaller, and you've just made it a lot more difficult for the new guy to get funding. To the point that the funding won't want to risk it. Monopoly upheld, customers still get screwed.

The worst part is that my tax dollars funded half this crappy network which doesn't meet any of the things they said the funding would get me when begged congress gave them the money in the first place. Very frustrating ...